Jul. 21 – India’s Union Minister of Corporate Affairs released the “National Voluntary Guidelines on Social, Environmental and Economic responsibilities of Business” this week, highlighting the subject of ethical responsibility in India’s corporate culture.
The Minister of Corporate Affairs believes these new guidelines will strengthen India’s corporate sector and enable it to evolve into a global leader in responsible business. He said the beginning of industrialization in India marked the transition from merchant charity to industrial philanthropy, which is more secular, more inclusive in terms of caste, creed and community and more oriented towards bringing progress to society through modern, western-style institutions.
The minister said his ministry has been pursuing implementing these new guidelines in the hopes of providing an effective regulatory structure to the Indian corporate sector to encourage business development, while also contributing to the growth of the society. According to the minister, his ministry has taken a number of initiatives over the past few months in legislative, regulatory, service delivery and capacity building areas. These initiatives are aimed at transforming and improving procedures and provisions under various laws, such as:
• Introduction of the online application process for obtaining Director’s Identification Number (DIN), a system allowing for the online payment of fees by companies, the Green Initiative allowing paperless compliance under the Companies Act, 1956 and the Easy Exit Scheme, 2011
• Convergence of Indian accounting standards with international financial reporting standards
• Launch of Investor Awareness Programs for the benefit of small and medium investors to safeguard their interests
• Introduction of a new policy that requires companies with five directors on their Board of Directors to appoint at least one woman
• Formulation of the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business
The Minister said Public Sector Undertakings have been embracing Corporate Social Responsibility (CSR) activities in a big way. For example, it was mandated that these enterprises are required to spend 2 percent of profits after tax on CSR activities.
The private corporate sector has come a long way from the days of ad hoc charity. The concepts of CSR, corporate citizenship and increasingly, responsible business, are prominent aspects of many companies in India. For example, it is becoming increasingly common to see private businesses undertake social, environmental and economic responsibilities, such as establishing charitable trusts, foundations and mega institutions by running community development programs and forming partnerships with the government or NGOs.
Furthermore, the new guidelines will also help bolster corporate responsibility into discussions of mainstream business issues. According to the minister, the guidelines represent an evolution and are a more refined version of the 2009 Corporate Social Responsibility Voluntary Guidelines.
These guidelines have been written, keeping in mind the varied sectors within which businesses function and the wide variety of business organizations that are present in India today – from the small and medium enterprises to large corporate organizations. The guidelines are applicable to all such entities, and are intended to be adopted by them broadly, as they raise the bar in a manner that makes their value-creating operations sustainable.
As well, the implementation of these voluntary guidelines can also develop the abilities of businesses to improve their competitive strengths and reputations, as well as their ability to attract and retain talent and manage their relations with society at large.